Presenter:

Syed Sannan Ahmed

Zubair Ayub

Faisal Faiz
Affect of Consumer Financing In
Pakistan
 Affect of Consumer Financing In
Discussion Outline:
Pakistan
• Introduction
• Research Problem
• Objectives.
• Hypothesis.
• Overview of Consumer Financing In Pakistan.
• Consumer Financing And Economic Growth.
• Literature Review.
• Research Methodology
• Population & Sample
• Instruments Used For Data Analysis
• Results Of Survey
• Conclusion
• Recomendations.
 Introduction

• Consumer finance in the most basic sense of the

word refers to any kind of lending to consumers.
• However "consumer finance" often refers to a
particular type of business.
• The Consumer Finance industry mainly came to
existance in the middle of the twentieth century.
•  At that time, these industries were all stand-alone
industries not owned by banks and an alternative to
banks.
 Research Problem
Issues like, problems in consumer banking due to
which some banks temporarily stop consumer
financing, why some banks haven’t implemented
full fledge consumer banking and what are the
opportunities in consumer financing & its effect on
economic development ,That will be analyzed in
this research.
 Objectives

Main Objectives:
• Role of consumer Financing in Economic Development
• Problems in current system of consumer financing
• Solution for problems faced by consumer.
• Exploration of opportunities in future
 Hypothesis

• Auto loans trend in consumer financing is

going to decrease due to high custom duty
charge by the government that has a negative
impact on economic growth of pakistan.
• While other products like credit/debit cards,
home loans and personal loans have a positive
relationship with the economic growth
 Hypothesis
• Poor Government Policies have a negative
impact on consumer financing and economic
growth as well.
Overview of Consumer Financing in
Pakistan
The main products of consumer financing in Pakistan
are given below:
• Auto loans
• Home Loans
• Personal Loans
• Credit-Debit Cards
• Deposits Accounts
Overview of Consumer Financing in
Pakistan
Auto Loans
• In Pakistan auto loans are purchase of brand new or
used, imported or local cars for private use.
Home Loans 
• The loans taken for Buying, Building or Renovating of
house/land are classified as home loans.
Personal Loans
• Personal loans include loans for the purpose of
education, marriage, purchase of consumer durables,
furnishing, traveling, etc. Generally the limit for
personal loans is maximum Rs.500, 000/-
Overview of Consumer Financing in
Pakistan
Credit-Debit Cards
• Credit Cards mean cards which allow a customer to
make payments on credit.
• In case of debit card, the amount used by the
debit card holder is directly debited from the
account of the card holder.
Consumer Financing And Economic
Growth
In recent years, Consumer financing has made
tremendous progress and has played a positive role in
boosting the economy and in meeting the needs and
requirements of the consumers.
The growing economy and further improvements in
the level of household income have created many
opportunities for consumer banking.
Consumer Financing And Economic
Growth
Exposure per borrower

Rupees in 000 2004 2005 2006

Credit Cards 23 26 32

Auto Loans 423 430 411

Consumer 37 29 22
Durable
Mortgage Loans 1572 1982 2025

Other Personal 82 89 100

Loans
Consumer Financing And Economic
Growth
 Literature Review

 Research Methodology

Primary Data Collection:-

1. Two survey forms have been designed for data collection
2. And five interviews have been conducted at different banks.
• Secondary Data Collection
Secondary data has been collected from different
1. Magazines
2. Web sites
3. News papers
4. Journals
 Primary Data Collection
1st Survey (From Bank ‘s Staff)
2nd Survey (from Bank’s Customers

• 2nd survey form was filled by

1st survey form was filled by
only those bank’s
employees which are
working in the area of sales,
credit, operations, branch
management or any other
area which is relevant to
consumer banking.
the customers of nine
selected local & foreign banks
in Pakistan. There were only
two conditions to be eligible
to fill out the form that the
bank’s that person must have
a bank account in any local or
foreign bank and have some
idea of consumer banking.
 Interviews
• Five interviews have been conducted by the
branch/relationship managers of two foreign and three
local banks for finding the relationship between the
economy and consumer financing. These Banks are given
below
• Standard Chartered Bank of Pakistan
• Royal bank of Scotland
• Muslim Commercial Bank (MCB)
• United Bank Limited (UBL)
• Faysal Bank Limited (FBL)
 Secondary data collection

Secondary data has been collected from different

magazines, websites, news papers and journals. For
secondary data collection the main focus was on local
materials while some information on consumer
banking in different countries has been collected to
see the trends and new opportunities.
 Population & Sample

• Population
This survey is conducted in different banks of
Karachi from people of different ages
including both males and females. Altogether
one hundred & fifty samples are selected from
customer survey out of two hundred forms
and fifty samples were selected out of seventy
in banks survey.
 Population & Sample

• Sample
Six local and three foreign banks have been
selected, all the survey forms have been filled
by staff of those banks and customers of those
banks.
 Instruments used For Data
Analysis

• The statistical tools that are used for analyzing the result of
these surveys are
1. Mean
2. descriptive statistics
3. and standard deviation
• The major soft wares that are being used for these surveys
analysis are
1. MS Word
2. MS Excel
3. SPSS
 Results Of Survey
Problems faced by borrowers
improper guidance
slow processing
bank statement
Bank account necessary
Problems faced by lenders
Target population is only middle class person.
Feel hesitation to provide loans to Poor classs
people as it increases the chance of default.
 Conclusion
The real beneficiaries of consumer finance are the
people who did not have capacity to purchase
expensive household items in a single go but
could afford them because of consumer finance.
The commercial banks that have been earning
large interest and huge returns on their
investment in consumer finance and the economy
that got impetus for growth.
 Conclusion
Economy is to sustain growth through consumer
finance as one of the important factors of growth,
then income inequalities should be bridged and
income level be increased to develop paying
capacity of large number of consumers.
 Recommendations
• As the number of complaints of misuse cards
increased PIN-based credit cards should be issued
that would provided additional security.
• Financing to negative area residents should be made
available and term & policies should be designed
accordingly to reduce the chances of defaults.
• Markup charged on consumer financing should be
reduced to a substantial level so the spread between
bank loans and deposit could be reduced and
customer could easily pay off the loans
 Recommendations
• Better returns should be provided on deposit
accounts

• To facilitate the customers new products and

services should be introduced continuously

• SBP should continuously update its regulations

according to need of people and economic
situations of the country
THANK YOU….